Startups – from an Investor’s Point of View

The lads and I went to the third floor of McSwiggans pub to the second Startup Galway event which consisted of the founder of boards.ie John Breslin interviewing Dermot Berkery in a fireside chat style of interview. Dermot is a partner at Delta investments which focuses on startups with potential for lots of growth and thus a big return-on-investment. Dermot was quite candid in his answers. Some of the interesting points raised were:

  • About 300-400 startups come looking for seed money but only about 10-12 get picked.
  • Usual seed money requested is about €500k – which apparently isn’t very much if you have to keep a team of people going, go through legal contracts / patenting and developing a product
  • The average startup founder they invest in is about 35-40
  • The usual initial pitch is a slide deck of about 15 slides instead of a business plan.
  • He made out that the share the investors would look for would be between 10-25% depending on the business if they’re interested.
  • If they are really interested, it can take about 4-5 weeks for them to do a full background check on the founders and then another 4-5 weeks to get through the legal arrangements. This all has to happen before the money is transferred.
  • Usually the relationship between the investors and founders is just regular update meetings (weekly / monthly) depending on the strength of the business and the founders. As the business progresses more investment may be sought at which point the investors may help look for more investment and help sell the business.
  • Unsurprisingly, Ireland is a more difficult place to grow a business to significant proportions when compared with the US. So usually, the founders in Ireland need to work a lot harder to expand their businesses because they have to expand to new countries which adds overheads and complexities.
  • If the founder is currently working and is seeking investment so they can leave their current employment and dedicate their full time to this venture – the salary would usually be less than the average working salary because they are getting usually a 75% or greater stake in a company in exchange for investment. There needs to be an incentive to work at growing the company.
  • Another interesting point brought up by a member of the audience who was from Enterprise Ireland was that both Galway and Dublin have startup hubs or incubators. Galway has New Frontiers.

I was sitting next to a guy, who’s I’ll call Bill. For the last 4 years Bill has been developing a product. He has 4/5 partners so far, a prototype and is in the finally stages of developing the product before selling it. However, he has put €80k of his own money into it and hasn’t sold one product yet. It really seems to me that he’s setting himself up for serious failure if this business doesn’t work out.

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